Today, credit plays an important role in almost every household in Switzerland. Every second person uses a private loan to finance projects or achieve a goal more quickly. However, it's always a good idea to be well-informed about the essentials of a private loan before embarking on an application. In this new article, Lica explains in detail how private loans work in Switzerland.
A little background on the history of the private loan...
The loan system has come a long way over the years. But it should be noted that the mechanism has not always been well regarded throughout its existence. The practice dates back to Greek Antiquity with trapezites before rapidly spreading to the rest of the world. However, the arrival of Christianity caused some mistrust, as the practice of charging a borrowing rate on a private loan was considered abusive.
The risks involved did not prevent foreigners, including Jews, from offering interest-bearing loans. In France, interest-bearing loans became legal in 1789. This was at the start of the French Revolution, when the legal rate was set at 5 %. Private loans also took different forms, such as "slates" or credit in "small shops".
Private loans began to take shape and establish themselves in our society from the 19th century onwards. At that time, small craftsmen began to offer help with financing when they had the opportunity. In any case, you should know that a private lender is simply a third party who has a sum of money available. He or she can lend it to anyone who really needs it to complete a project. And the majority of private lenders prefer to focus on real estate projects.
How a private loan works
In addition to financing private projects, some private lenders also engage in corporate lending. However, in both cases, a lender must always check certain criteria to protect against loss of the sums loaned. So a detailed analysis of your loan application with the help of an experienced intermediary is always a good thing! With this in mind, Lica helps you to obtain a loan at the best market conditions, thanks to the meticulous preparation of your file.
Let's take a look at the detailed components of a private loan:
Loan amount
In Switzerland, a private loan can range from CHF 3'000.- to CHF 400'000.-. The amount of the private loan granted will depend on your situation, your financial history and the overall quality of your application. For more information on the decisive criteria for obtaining a loan on advantageous terms, please consult our article " How to obtain a private loan at a low rate"
Income/monthly income ratio
To ensure that your monthly credit repayments are in line with your income, lenders generally ensure that the ratio between your monthly income and your monthly repayment does not exceed 35%. So, for an income of 5’000.-, your monthly repayment could not exceed CHF 1’750.-.
Application fees
Some private loans may include a handling fee that should not be ignored. These can range from 1% to 5 % of the loan amount. The fee normally relates to the analysis of your file, taking all terms into account. At Lica, private loans are always free of charge!
The interest rate
The interest rate on a private loan varies largely between 3.9% and 9.9%. It will depend on your ability to negotiate and the quality of your file. Here you can count on Lica to negotiate the best terms for your private loan and defend your interests against the various lenders on the market.
Credit period
Most private lenders prefer short-term loans. So you should expect your contract to run for a maximum of 120 months. Bear in mind that your lender is also thinking in terms of maximizing the return on his money.
The penalty
It is entirely possible to repay the loan early. However, you should expect some lenders to charge you early termination fees. They may also charge additional interest if you are late in repaying. On this point, you can rest assured that Lica works exclusively with lenders who do not charge fees for early repayment of your private credit. Our customers' financial flexibility is crucial to us!
The warranty
In some cases, having additional collateral to your income may give you an advantage over a lender. For example, owning your own home may entitle you to a discount on the interest rate of your private loan.
Monthly payments
It's a good idea to work out the monthly repayments with your lender before they release the funds for your private financing. Several repayment terms are available. So take the time to choose the term that best suits your budget.
What are the advantages of a private loan?
A private loan is a win-win situation for both lender and borrower. In fact, this type of financial assistance offers the following advantages:
A loan that's easier to obtain
As a borrower, you'll find it much easier to get the amount your lender is offering. Getting the money doesn't require as many conditions as with mortgages. What's more, by enlisting the help of a private credit broker, you won't even have to waste time competing with other lenders or preparing your file!
The lender can easily recover his money
As you already know, a private credit is a type of loan established over a short period of time. This means that the lender won't have to wait many years to get all his money back, with interest. He can then invest quickly in another project.
Find the right partner for your private credit application
It's important to take certain risks into account before applying for a private loan. You can base your decision on the following points:
Make sure your intermediary is serious!
We can't stress this enough! Make sure that your private loan intermediary has a good reputation and is recognized as such on the market. A quick check of the lender's social networks, address and Google page can help you avoid any disappointment when applying for a loan.
Choose the answers to your questions
Whether it's your first loan, or even if you've been in the private-lending business for a long time, make sure your contact can answer all your questions before you commit yourself. A professional should be able to answer all your questions straight away!
Read your contract carefully before signing
Although your credit intermediary will protect you from signing a contract containing unfair clauses, reading it will help you understand the commitments you are making. It's important to read the conditions attached to your credit contract carefully.
How private loans work
The way a private loan works in Switzerland depends on a number of factors that are always worth knowing. A private loan is a long-term commitment, so we feel it's important to keep our customers well informed. In this way, you can make a well-informed decision.
Now that you know how private loans work in Switzerland, all you have to do is apply. With Lica it's simple, fast and efficient! That's right, you apply online in less than 2 minutes, and then our specialized teams do the work for you. That saves you time and money!